With GLJ’s recently updated price forecast, we see current trends pointing towards a much tighter power supply scenario as a result of the recovery in demand. As economies shift from a focus on vaccination rates and pandemic control to reopening and increasing productivity, energy demand has rapidly returned to near-pandemic levels.
Supply lagged in demand
Recent underinvestment and below-average seasonal storage levels in North America and Europe have resulted in lower overall energy availability. Power producers have been cracking down on substantial CAPEX increases in favor of paying off debt and aiming for consistent production levels. In addition to this, world oil supply is not expected to increase rapidly, as OPEC has recently reiterated its commitment to gradual increases in production. These circumstances continue to inflate prices around the world.
Inflated energy prices are expected to persist in the short and medium term until production levels and adequate transportation can meet the pent-up demand created by the pandemic. While this may be good news for oil and gas producers, the effects of the sustained rise in energy prices may generate further inflationary pressures globally.
Energy transition policy
In addition to the current difficult market conditions, energy transition trends (including the upcoming United Nations Climate Change Conference) can drive climate-related initiatives even further to the forefront. This has the potential to affect future oil and gas production in the developed world as investment is redirected to alternative energy sources. This trend can have the unintended consequence of inflating energy prices further as we change our consumption trends. Producer nations like Canada must also exercise caution in achieving a practical energy transition to avoid simply “offshoring” all future energy growth to other countries to achieve unrealistic targets (many competing producer nations do not have such robust checks and balances on ESG factors). like Canada). As with any transition, there will undoubtedly be associated growth problems, and the next decade may see these problems emerge as inflated energy prices and blanket product prices to consumers before new energy sources can offset demand. global.
GLJ October Prices
GLJ has released our latest evaluator Commodity price forecast as of October 1, 2121 reflecting current bullish market sentiment observed in energy markets. Our oil forecast has established that the WTI will rise to $ 64.00 USD / bbl (real) in the medium to long term, while Edmonton light crude prices have increased to a real price of $ 74.50 CAD / bbl. GLJ’s natural gas forecast has been adjusted to reflect current short-term market trends, while stabilizing in the long-term at $ 3.00 USD / MMBtu and $ 2.85 CAD / MMBtu in real dollars for Henry Hub and AECO respectively.
GLJ Ltd. is a leading energy resource consulting company. With extensive industry experience and a customer-centric philosophy, GLJ brings technical excellence to a global customer base. The company’s long-term track record of success comes from an experienced team of professionals who are absolutely committed to delivering high-quality results for their clients. For more information visit www.gljpc.com
Written by Justin Mogck, GLJ Ltd.
As GLJ’s Director of Commodity Research, Justin leads GLJ’s price forecasting and related market research and analysis. He has also developed expertise in conventional and unconventional evaluations and has a variety of experience in North American A&D transactions, corporate evaluations, and economic models.